FMO (“NEDFIN”) INVESTOR PRESENTATION THE DUTCH DEVELOPMENT BANK April 2016 www.fmo.nl
CONTENTS I. About FMO 3 II. Strong Backing by the State 5 III. Investment Approach 9 IV. Financials & Risk Management 14 V. Liquidity Management & Funding 23 VI. Contact 28 VII. Appendix 30 2
I. ABOUT FMO 3
FMO AT A GLANCE The international development bank of the Netherlands - incorporated in 1970 Promoting sustainable private sector growth in developing markets focusing on green and inclusive development Strong backing by the State of the Netherlands AAA (Fitch), AAA (Standard & Poor’s) credit ratings and industry leading sustainability ratings Licensed bank supervised by the Dutch Central Bank FMO is an eligible issuer under the Public-Sector Purchase Programme of the ECB WE EMPOWER ENTREPRENEURS TO BUILD A BETTER WORLD 4 4
II. STRONG BACKING BY THE STATE 5
DUTCH STATE IS MAIN PROVIDER OF CAPITAL • Public Private Partnership • The State owns 51% of the shares (A shares). Private sector entities own 49% of the shares (B shares) • Voting rights for A shares and B shares are equal. A shares may only be issued to the State • The State has an economic interest of more than 90% of shareholders’ equity Shareholders’ equity (in EUR mln, per December 31, 2015) Shareholders (per December 31, 2015) 7% 545 51% 1,308 42% 658 Contractual Reserve Dutch State Development Fund Dutch banks: ABN AMRO, ING, Rabobank Share Capital, Share premium reserve and Other Components* Trade Unions, Employer's Federations, Companies, Individuals * Other components comprise of available for sale reserve, translation reserve, other reserves and undistributed profit, and minority interest. Differences may arise due to rounding 6
EXPLICIT DUTCH STATE SUPPORT Explicit support agreement* Documented in the bilateral “Agreement State – FMO of 16 November 1998 ”** Art. 7: Maintenance Obligation: ‒ The Dutch State is committed to covering all losses from operations that cannot be covered by general or specific provisioning and reserves Art. 8: Financial Security Obligation: ‒ The Dutch State shall prevent situations arising in which FMO is unable to meet its commitments on time Valid for an indefinite period and may be cancelled subject to a twelve-year notice period *) http://www.rijksoverheid.nl/documenten-en-publicaties/notas/2013/10/18/nota-deelnemingenbeleid-rijksoverheid-2013.html **) This is a synopsis of the actual text. The State Agreement should be fully read for a complete understanding. A full copy of State Agreement available at www.fmo.nl 7
FMO MANAGES EUR 1,194 MLN IN GOVERNMENT FUNDS *) Off balance sheet funds for risk of the Dutch Government to finance high risk projects MASSIF: EUR 562 mln Resources for financial institutions to aid the development of Micro, Small and Medium-sized Enterprises (MSMEs) Infrastructure Development Fund: EUR 521 mln Long-term financing for infrastructure projects Access to Energy Fund : EUR 81 mln Private sector projects that create sustainable access to energy services * Committed per Dec. 31 st 2015; includes FOM-OS of EUR 30 mln 8
III. INVESTMENT APPROACH 9
FOCUS ON SECTORS WITH HIGHEST LONG-TERM IMPACT 8% Access to affordable energy is not just By supporting financial institutions , FMO essential for everyday living – it can also paves the way for financing SMEs, micro- 38% empower those who use it enterprises and individuals as well 31% 23% Financial Institutions Energy Other Agribusiness High-impact initiatives from other sectors can Achieving long term sustainability in global also benefit from FMO’s services, expertise *Based on committed investment agribusiness production requires large and global network portfolio, excl. government funds, of investments targeted at improving farming EUR 8.1 bln per Dec. 31 st , 2015 practices, increasing yields and reducing waste 10
PROVIDING LONG TERM FINANCING • Broad range of financing products Investment portfolio per currency* • Third party financing through FMO Investment Management and syndicated loans 9% 13% Euro • Private equity: USD Fund investments, co-investments with funds and direct ― investments in focus sectors Local currency 78% Typical holding period 5 – 10 years ― Investment portfolio per product* Private equity portfolio (per Dec 31 st 2015) 13% Equity 3% 29% Loans 36% Private equity Guarantees funds Mezzanine Direct 64% investments 55% * Based on committed investment portfolio, excl. government funds, of EUR 8.1 bln per Dec 31 st 2015 11
INVESTMENT PROCESS Credit Advice Credit Advice Credit Advice Credit Advice Annual Review Term Sheet Contract Clearance in Provisioning Finance Principle Changes Due Diligence SO Proposal Disbursement Fair Value IRC / CR Decision CR Decision IC Decision IC Advice CR Decision Front Office Decision MB Decision 12
INTEGRATED ESG APPROACH FMO believes that long-term profit and viability must go hand in hand with enduring economic and social impact. SUSTAINABLE INVESTMENTS Environmental Impact Social Impact Corporate Governance Economic Impact • Resource efficiency • Diversity • Board structure and • Consistent profitable • Energy efficiency • Human rights accountability growth • Biodiversity • Health & safety • Internal controls, audit and • Shareholder value • Emissions to air • Community relations • Risk management risk management • Global energy issues • Equal opportunity • Conflicts of interest and • Water/Chemical usage • Respect for related party transactions • Accounting and disclosure individuals practices • Independence of external auditors 13
IV. FINANCIALS & RISK MANAGEMENT 14
STEADY PORTFOLIO GROWTH Portfolio development 2005 – 2015 (in EUR mln) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Committed portfolio* 2,059 2,216 2,765 3,543 3,877 4,566 5,046 5,450 5,789 7,065 8,062 * Committed portfolio excludes government funds; CAGR: Compounded Annual Growth Rate 15
PROFITABLE THROUGHOUT THE CRISIS Income composition (in EUR mln) 350 300 250 200 150 100 50 0 -50 -100 -150 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Income 134 202 199 210 166 225 238 271 254 260 320 Value adjustments 8 6 -36 -124 -52 -29 -59 -46 -18 -51 -29 Net Profit 73 134 105 48 60 126 93 146 133 124 174 16
DIVERSIFIED BELOW INVESTMENT GRADE PORTFOLIO Portfolio breakdown per credit rating* 45% 43% 41% 41% 40% 40% 38% 40% 35% Dec-13 30% Dec-14 25% Dec-15 20% 16% 13% 15% 12% 10% 6% 5% 4% 5% 0% BBB- and higher BB-, BB, BB+ B-, B, B+ CCC+ and lower ratings • Per Dec 2015 approx. 600 counterparties with approx. EUR 15 mln average exposure **) • Credit ratings reflect counterparty credit quality • Internal credit ratings are mapped versus Moody’s • Collateral is acquired on 29% of the gross loan amount *) Gross loan portfolio excluding government funds (disbursed) **) Number of counterparties and exposure relate to the gross loan portfolio 17
RECENT GRADUAL INCREASE IN NPL’S; LOW WRITE -OFFS Non-performing loans development 16% 13.6% 14% 12.4% 12% NPL % of portfolio 10% Principals with arrears > 8.1% 90 days 8% 6.9% 6.8% Write offs % of portfolio 6.0% 5.8% 6% 4.9% 3.8% 3.6% 4% 3.2% 4.1% 2.3% 3.4% 3.5% 2% 1.1% 0.6% 0.4% 0.5% 0.6% 0.5% 0.2% 0.1% 0.3% 0% 2008 2009 2010 2011 2012 2013 2014 2015 • Recent increase in NPL’s due to country and counterparty specific events • Low write-downs as a result of active management and focus on recovery * NPL %: loans value adjusted and loans not value adjusted but past due more than 90 days as % of the gross loan portfolio excluding government funds (disbursed) 18
BACKED BY CONSERVATIVE PROVISIONING Loan provisioning 14.0% 12.5% 12.1% 11.6% 12.0% 11.0% 10.4% 10.0% 9.2% 8.4% 7.8% 8.0% 6.0% 4.1% 3.6% 3.4% 3.5% 3.8% 4.0% 3.2% 2.3% 2.0% 1.1% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 Principals with arrears > 90 days Value adjustments • Value adjustments on loans consist of: ― Counterparty-specific value adjustments ― Group-specific value adjustments * As % of the gross loan portfolio excluding government funds (disbursed) 19
WELL DIVERSIFIED GLOBALLY Portfolio breakdown per country and sector 8% 7% 6% Other 5% Agribusiness 4% Energy 3% Financial Sector 2% 1% 0% • Exposure spread over more than 85 countries • 10 largest country exposures represent approx. 1/3 of the total portfolio • Country limits based on country ratings and FMO’s capital base • Sector limits capped at 50% of country limit * Based on committed investment portfolio of EUR 7.6 bln as per June 30 th , 2015 excl. government funds and loans guaranteed by the Dutch State 20
EUR 8.1 BLN OF INVESTMENTS AROUND THE WORLD *) (Dark) No requirement for a relation with Dutch businesses EASTERN EUROPE & CENTRAL ASIA €1.1 BLN ASIA € 2.3 BLN NON SPECIFIC REGION LATIN AMERICA & THE CARIBBEAN € 0.5 BLN €1.9 BLN AFRICA € 2.3 BLN * Per Dec 31 st , 2015. Committed portfolio excl. government funds and loans guaranteed by the Dutch State 21
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